Why Saif Partners backed Zoomo, a market place for pre-owned cars

The used car market in India is large with about $10bn worth of cars being sold every year, but 85 per cent of all used cars sold are sold through unorganised channels. Buying a used car is a strenous exercise for the fear of being saddled with a lemon. Thus, buyers have always been wary of dealers who have the incentive to hide the car’s actual condition and history. Also, car dealers take anywhere around 8-10% on the car value as their commission on used car transactions, purely due to information assymetry. Thus, buyers feel they overpaid and sellers feel they did not get the car’s full worth when a dealer is involved in the transaction. 

In such a scenario, both sellers and buyers look for a trusted source or friend. A model that is dependent on dealers would find it tough to solve the customers’ real pain points. Zoomo aims to replicate a trusted friend by becoming a full-stack P2P marketplace wherein all cars come with a comprehensive pre-inspection report and warranty. So as a seller, when you request for a listing on Zoomo, an expert first inspects your vehicle and this report is shared with a potential buyer. 

Multiple elements of their model and execution make us believe that Zoomo is on its way to building a large business that solves a large customer pain point.

1. Zoomo gives buyers the confidence that the car’s condition is pre-validated by experts and there are no surprises lurking under the hood, literally.
 

2. By making the transaction peer-to-peer, they are eliminating the middleman and thus passing on the benefits to both sellers and buyers. Zoomo can eliminate 80% of these costs and pass on the benefits to the users.
 

3. Use of technology, especially mobile, has allowed them to scale fast. They are currently doing six times the transactions that they were doing six months back.

Over the last six months, the founders have built a very strong team around them and are now going full steam ahead to expand to more cities in India. We are very excited about the team and believe they can fundamentally shift users’car buying behaviour in India.

Mayank Khanduja is vice-president at VC firm Saif Partners which invested twice in this company